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Pedestrians and shoppers walk through the Ginza area of Tokyo on Sept. 8.

More In Sales Tax

Japan’s revised April-June gross domestic product figures may have pointed to a strong improvement in the economy, but does it make sense to let this data set determine a contentious tax hike many months away from now?

As debate heats up over whether to move ahead with a plan to raise the 5% sales tax to 8% next April, some economists are questioning the government’s focus on the revised GDP data in making the key decision.

“This makes little sense,” said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute. “We must remember what happened in April-June 1996, ahead of the consumption tax hike in April 1997,” he said, referring to the last time the tax rate was raised, from 3% to the current 5%.

Back in 1996, the economy was enjoying what appeared to be a promising recovery from the bursting of a major asset-price bubble in the early 1990s.

In the April-June quarter of that year, GDP – the total value of goods and services produced – expanded 4.3% in real annualized terms, according to the Cabinet Office. Business spending and housing investment were rising at double-digit rates. And that followed solid 3% GDP growth in the previous quarter. Those numbers are comparable with the revised 3.8% figure released earlier on Monday for the same quarter this year.

But after the government raised the consumption tax to 5% in April 1997, the economy sank into recession. The downturn would last for over a year and a half, helping deflation take root in Japan.

Reflecting on that experience, Mr. Nagahama says the government should consider a more incremental increase in the tax rate rather than the three-percentage-point hike in April.

To be sure, it’s hard to tell how much of the 1997 tax raise contributed to the subsequent slump.

Proponents of the current tax plan, led by the Ministry of Finance and the Bank of Japan, say the following recession had more to do with two other incidents in 1997: Asia’s currency crisis from July and Japan’s own banking turmoil in November.

Opponents argue otherwise, saying the Asian crisis  had only limited impact on Japan’s exports and that Japan’s banking sector imploded partly because the tax hike weakened the whole economy.

But regardless of what was the main factor behind the recession back then, the lesson that the economy will be hit has been learned.

Prime Minister Shinzo Abe has said he will review a wide range of economic data, and will now turn to the Bank of Japan’s tankan quarterly survey of business sentiment due out on Oct. 1 before making the final decision shortly afterwards.

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